Prescription Drug Fair Pricing Act

This Act shall be called the “Prescription Drug Price Transparency Act.”

SECTION 2. FINDINGS AND PURPOSE

(A) FINDINGS—The legislature finds that:

(1) Name–brand and specialty drug costs rose over 12% in 2014, which is nearly double any other health care spending category.

(2) Drug costs are a major cause of higher health care premiums each year.

(3) In 2013, the U.S. healthcare system spent more than $80 billion on specialty drugs alone, which cost on average 37 times higher than traditional drugs and represent 31% of total drug spending and are projected to increase to 44% of overall drug spending by 2017.

(4) Certain pharmaceutical manufacturers, exploiting insufficient competition in the market for certain essential generic drugs that had long been available to patients at an affordable price, have in recent years imposed unconscionable price increases, impeding access to these drugs and putting patients and public health at risk.

(5) Disclosure of drug development costs and marketing expenditures by drug corporations will foster transparency for patients and public and private health insurers and create accountability on the part of drug corporations to deliver a fair return on public investments in their products.

(6) Consumers and policymakers deserve more information on drug costs and cost increases to inform solutions that may help lower health care costs to consumers.

(7) Requiring drug corporations to disclose the basis for the prices of their prescription drugs and to notify the public about substantial increases in prices would create accountability on the part of drug corporations and help to stem the increase in health care costs, which is hurting individual consumer and patients and the entire economy.

(8) Giving the Attorney General authority to take legal action against price gouging in the sale of essential generic drugs will protect residents who rely on those drugs against unconscionable pricing practices that threaten their health and well–being.

(9) The entire health care system is at risk if drug costs are not stabilized.

(B) PURPOSE—This law is enacted to protect the health and welfare of state residents.

SECTION 3. PRESCRIPTION DRUG PRICE TRANSPARENCY

After section XXX, the following new section XXX shall be inserted:

(A) DEFINITIONS—In this section:

(1) “Average wholesale price” means the medi-span average wholesale cost based on the actual eleven-digit national drug code dispensed as of the fill date of the expensive drug that is submitted by the dispensing pharmacy and is used to fill the prescription for the expensive drug.

(2) “Expensive drug” means a prescription drug that a manufacturer makes available in the State; and has a wholesale acquisition cost of $2,500 or more annually or per course of treatment.

(3) “FDA” means the federal Food and Drug Administration.

(4) “Manufacturer” means a person that:

(a) Is authorized by the FDA to market and sell an expensive drug in the United States as an originator or licensee; or

(b) Directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, a person described in item (a) of this paragraph.

(5) “Purchaser” means

(a) The State, including:

(i) The State Employee and Retiree Health and Welfare Benefits Program;

(ii) The State Medical Assistance Program;

(iii) The State Pharmacy Assistance Program;

(iv) The State Medbank Program;

(v) The Medicare Option Prescription Drug Program; and

(vi) The Maryland Children’s Health Program;

(b) A local government;

(c) A managed care organization as defined in [§ 15–101 of this Article];

(d) An authorized insurer that provides health insurance in the State;

(e) A nonprofit health service plan;

(f) A health maintenance organization;

(g) A dental plan organization;

(h) A pharmacy benefit manager regulated under [Title 16 of the Insurance Article]; and

(i) Any other person that provides health benefit plans subject to regulation by the State.

(6) “Therapeutic class” means a therapeutic category or class of drugs established by the United States Pharmacopeia that reflects therapeutic uses of drugs based on the international classification of diseases diagnostic codes.

(i) The total annual and cumulative itemized costs for the manufacturer to produce the expensive drug since the manufacturer began producing the expensive drug;

(ii) The manufacturer’s total direct costs for materials, manufacturing, and administration attributable to the expensive drug; and

(iii) All marketing and advertising costs for the promotion of the expensive drug directly to consumers, including costs associated with consumer copay coupons and amounts redeemed and marketing and advertising costs for promotion of the expensive drug directly or indirectly to prescribers;

(d) Prices of the expensive drug and returns from sales, including:

(i) The total revenues from sales in the State and in the United States, listed separately, for each of the immediately preceding 5 calendar years; and

(ii) A cumulative monthly history of increases in the average wholesale price or wholesale acquisition cost for the immediately preceding 5 years, including each month in which an increase in average wholesale price or wholesale acquisition cost took effect;

(e) The manufacturer’s federal, State, local and income tax rates, governmental benefits, and credits, including:

(i) The federal, State, and any applicable local tax income rate paid by the manufacturer;

(ii) The total amount paid by any person other than the manufacturer for materials, manufacturing, marketing, advertising, administration, and other costs attributable to the expensive drug, including any federal, state, local tax credits or subsidies, tax deductions, grants, or other support received or deferred; and

(iii) All income from any source from any of the following activities undertaken in a foreign country by or on behalf of the manufacturer of an expensive drug: researching, developing, manufacturing, or producing the expensive drug; the sale, exchange, or other disposition of the expensive drug; or the lease, rental, or licensing of the expensive drug;

(f) Financial assistance to patients, including:

(i) The total amount of financial assistance to patients the manufacturer has provided for the expensive drug, for each of the immediately preceding 5 years, including discounts; rebates and patient prescription assistance programs; copay assistance costs; and total donations to patient assistance nonprofits and the related tax deductions; and

(ii) The number of patients who have benefited from the manufacturer’s financial assistance for each of the immediately preceding 5 calendar years;

(g) Comparative effectiveness of the expensive drug, including:

(i) The therapeutic class of the expensive drug;

(ii) The names of any other brand or generic drugs approved by the FDA in the same therapeutic class; and

(iii) Any clinical or pharmacoeconomic evidence indicating the expensive drug’s improved efficacy compared to all other brand or generic drugs approved by the FDA in the same therapeutic class; and

(h) Any other category of information required to be included under regulations adopted under subsection (5) of this section.

(3) The manufacturer shall:

(a) Separately identify by line item the information included in the annual report to the maximum extent possible to promote public transparency and understanding of the information;

(b) Provide documentation for the information included in the annual report;

(c) Have the information in the annual report audited by an independent third–party auditor before the report is filed with the Secretary; and

(d) Include information for the immediately preceding calendar year unless otherwise required under subsection (3) of this section.

(5) An annual report filed under subsection (1) of this section shall constitute public information.

(6) A custodian may not deny inspection under the Public Information Act of an annual report filed under subsection (1) of this section, or any part of the report.

(7) The Secretary shall post each annual report filed under subsection (1) of this section on the Department’s Web site.

(C) REGULATIONS AND ENFORCEMENT

(1) The Secretary, in consultation with the [Drug Price Transparency Advisory Committee], shall adopt regulations to carry out this section.

(2) The regulations shall:

(a) Facilitate public transparency regarding:

(1) The pricing of expensive drugs;

(2) The return realized by the manufacturers from the sale of expensive drugs; and

(3) The return on public investment in the development of expensive drugs made through federal, State, or local grants or other government financial assistance;

(b) Identify any additional specific information within each of the categories listed in this section that the manufacturer must include in an annual report; and

(c) Include a uniform reporting form that the manufacturer must use to facilitate the disclosure of the information required to be reported and the Secretary’s preparation of the report required under subsection (g) of this subtitle.

(3) On or before December 31, 2018, and each December 31 thereafter, the Secretary shall publish a report that summarizes the reports filed by manufacturers under this section since the last report was published by the Secretary.

(4) The Secretary shall:

(a) Provide copies of the report published under this section to the Governor and, in accordance with [§ 2–1246 of the State Government Article], the General Assembly; and

(b) Post a copy of the report on the Department’s Web site.

(5) If a manufacturer fails to file an annual report as required under this section or files an inaccurate annual report, the Secretary shall impose a civil penalty not to exceed $10,000 for each day the violation continues.

(6) If a manufacturer fails to file an annual report as required under this section, the Attorney General may seek a court order in a court of competent jurisdiction requiring the manufacturer to file the required report.

(7) The Attorney General shall serve notice on the manufacturer of the intent to seek an order under this subsection at least 7 days before seeking the order.

(8) If the Attorney General is granted an order requiring the manufacture to file a required report, the Attorney General shall be entitled to recover reasonable attorney’s fees and costs.

(D) DRUG PRICE TRANSPARENCY ADVISORY COMMITTEE

(1) There is a Drug Price Transparency Advisory Committee which shall consist of the Secretary or the Secretary’s designee and the following members, appointed by the Secretary:

(a) Two academic public health researchers;

(b) One economist;

(c) One certified public accountant;

(d) One licensed physician who practices in the State;

(e) One licensed pharmacist who practices in the State; and

(f) Two consumer representatives.

(2) A member of the Advisory Committee may not be affiliated with a manufacturer or have any other conflict of interest regarding the duties of the Advisory Committee.

(3) The Advisory Committee shall advise the Secretary regarding:

(a) The development of the regulations required under this subtitle;

(b) The review of the annual reports filed by manufacturers under this subtitle; and

(c) The preparation of the reports the Secretary is required to publish under this subtitle.

(4) The Secretary, or the Secretary’s designee, shall chair of the Advisory Committee.

(5) The Secretary shall adopt regulations to carry out this section, including regulations governing:

(a) The minimum number of times the Advisory Committee must meet each year;

(b) Any compensation for and reimbursement of expenses incurred by Advisory Committee members; and

(c) The terms of Advisory Committee members.

(E) DISCLOSURE OF PRICE INCREASES.

(1) A manufacturer of an expensive drug shall file a notice with the Secretary before increasing the average wholesale price or wholesale acquisition cost of the expensive drug by more than:

(a) 10% or $2,500, whichever is less, during a 12–month period; or

(b) 15% cumulatively during any 24–month period.

(2) The notice required under this subsection shall be filed at least 60 days before the increase takes effect; be in writing; and state:

(a) The justification for the price increase;

(b) The marketing budget for the expensive drug in the immediately preceding calendar year;

(c) If the expensive drug was not developed by the manufacturer, the date the expensive drug was acquired by the manufacturer and the price of the acquisition; and

(d) The history of all price increases for the expensive drug that took effect during the immediately preceding 5 calendar years.

(3) Within 15 days after a notice is filed under this subsection, the Secretary shall:

(a) Post the notice on the Department’s Website; and

(b) Send electronic notice of the filing to purchasers that have requested to receive notification and the State Board of Pharmacy.

(4) A custodian may not deny inspection under the Public Information Act of a notice filed under this subsection.

(5) The Secretary shall establish a process through which a purchaser may request to receive notice of filings made under this subsection.

(6) If a manufacturer fails to file a notice as required or files an inaccurate notice, the Secretary shall impose a civil penalty not to exceed $10,000 for each day the violation continues.